On January 1, Year 1, Pierce Corporation issued $25,000 in 8%, 5-year bonds payable at 102. Interest payments are due each December 31. Pierce uses the straight-line method to amortize bond discounts andpremiums.Which of the following shows the effect of the bond issuance on January 1, Year 1?AssetsA.25,50025,500B.C. 25,500D.25,500Multiple ChoiceOOOOBalance Sheet= Liabilities +25,50025,50024,50024,500Option COption AOption BOption DStockholders'Equityn/an/a500500Revenuen/an/a500500Income StatementExpensen/an/an/an/a= Net Incomen/an/a500500Statement of Cash Flows25,500 FA25,500 OA25,500 OA25,500 FA

Assets, liabilities and stockholders equity are recorded in the Balance Sheet. Income and expenses are recorded in the Income statement. The increase in cash will result in increase in asset. The increase in bonds payable will increase the liability.Correct Option: Option A Assets = Liab + Equity Revenue - Expense = Net Inc Cash Flow 25500 = 25500 + NA NA - NA = NA 25500 FA Working: Issue price = $25000 * 102% = $25500 Premium on bonds payable = $25500 - $25000 = $500 Issuance of bonds will increase cash (asset) by $25500 The bonds payable and premium on bonds payable will be recorded under liability. Issuance of bonds are a financial activity.

Business

Accounting

On January 1, Year 1, Pierce Corporation issued $25,000 in 8%, 5-year bonds payable at 102. Interest payments are due each December 31. Pierce uses the straight-line method to amortize bond discounts and premiums. Which of the following shows the effect of the bond issuance on January 1, Year 1? Balance Sheet Assets A. 25,500 B. 25,500 C. 25,500 D. 25,500 Multiple Choice OOO O = Liabilities + 25,500 25,500 24,500 24,500 Option C Option A Option B Option D Stockholders' Equity n/a n/a 500 500 Revenue n/a n/a 500 500 Income Statement Expense n/a n/a n/a n/a = Net Income n/a n/a 500 500 Statement of Cash Flows 25,500 FA 25,500 OA 25,500 OA 25,500 FA

On January 1, Year 1, Pierce Corporation issued $25,000 in 8%, 5-year bonds payable at 102. Interest payments are due each December 31. Pierce uses the straight-line method to amortize bond discounts and premiums. Which of the following shows the effect of the bond issuance on January 1, Year 1? Balance Sheet Assets A. 25,500 B. 25,500 C. 25,500 D. 25,500 Multiple Choice OOO O = Liabilities + 25,500 25,500 24,500 24,500 Option C Option A Option B Option D Stockholders' Equity n/a n/a 500 500 Revenue n/a n/a 500 500 Income Statement Expense n/a n/a n/a n/a = Net Income n/a n/a 500 500 Statement of Cash Flows 25,500 FA 25,500 OA 25,500 OA 25,500 FA

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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